Industry Groups Debate Proposed Trade Tariffs
In a trade war with China, American Chemistry Council CEO Cal Dooley said what he fears most is retaliation damaging U.S. chemical and plastics exports.
ACC estimates the fallout from escalating tit-for-tat tariffs between Washington and Beijing could impact up to $5 billion of the industry's exports to China, with 40 percent of Beijing's response so far aimed squarely at squeezing American chemical and plastics makers.
The head of the Alliance for American Manufacturing, however, sees the Trump administration's proposed tariffs as a necessary evil.
AAM President Scott Paul argued that Chinese imports have played a "major part" in the loss of one in three factory jobs in the United States since 1998, making trade restrictions a risk worth taking to help level the field.
"To me, tariffs are an emergency room measure — they are triage until we can get a much more sustainable approach — but they are absolutely necessary," he said.
That was the heart of the argument playing out in an April 12 Congressional hearing on the Trump administration's proposed tariffs against China.
Various industry groups, companies and lawmakers debated the administration's plans to impose $50 billion in tariffs on Chinese imports and China's matching response targeting key U.S. exporters, including plastics and agriculture.
At the hearing in the House Ways and Means Committee, there seemed to be universal agreement among industry and members of Congress that the U.S. government should be tougher against what it sees as China's mercantilist behavior.
ACC, for example, supports Trump's efforts to tackle intellectual property rights and requirements for technology transfer. But tariffs are not the right tool, ACC argued.
The hearing offered competing visions of the U.S. economy.
One side focused on dislocations from global trade. AAM noted that the U.S. goods trade deficit with China has risen from $83 billion in 2001, when China joined the World Trade Organization, to a record $375 billion last year.
And the group cited estimates that the trade imbalance has cost the United States 3.4 million jobs, mostly in manufacturing.
Most subsectors in the plastics industry — products, molds and machinery — have deficits with China of $12.3 billion, $375 million and $212 million, respectively, in 2016, the last year figures are available.
The plastics resin sector was the exception, however, with a $2.7 billion surplus. Dooley said China imported 11 percent of U.S. plastic resins last year, or $3.2 billion worth.
That resin surplus is part of a growing U.S. industrial chemical surplus that hit $33 billion worldwide last year. ACC estimates that will soar to $73 billion by 2020, driven by low-cost shale gas feedstocks and the sizable investments underway in the U.S. chemical and plastics sectors.
That growing export strength framed Dooley's testimony.
"If you listen to some of the comments here, you would think that our economy was failing or not being globally competitive," he said. "But our service sector is globally competitive, if not a leader. Our energy sector has now become a global leader. The chemical manufacturing sector is a global leader. Our U.S. agriculture sector is a global leader.
"Our concern is if you're not tactical … it invites a retaliation," Dooley said. "That retaliation is going to go at our most competitive sectors. And that's where we have great concerns."
The automotive supply chain also appeared at the hearing and largely echoed ACC's caution.
Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association, said the industry was very worried about fallout from tariffs and trade conflicts.
"The combined impact of these tariffs has thrown many of our member companies close to a financial crisis and has made some of them question their future investments in the U.S." she said. "Tariffs will have a negative impact on these manufacturers, the jobs they create and ultimately the American consumer."
Wilson said the auto component sector welcomed U.S. government action on weak intellectual property protections in China but was "alarmed at the escalating rhetoric" on tariffs and trade.
There were other voices of concern on tariffs. An April 9 Brookings Institution study said jobs in the plastics products and resin sectors were among the most at risk from China's retaliatory tariffs.
The hearing included some pointed exchanges, such as between Dooley and Rep. Sandy Levin (D-Mich.), who challenged the ACC leader to spell out a "global solution" to problems that have proven difficult to solve with negotiation, like overcapacity in the Chinese steel industry.
AAM's Paul argued that China's plans for industrial modernization raise the stakes for U.S. manufacturers.
"There is not an easy answer, particularly with [Chinese] President Xi doubling down on the desire to build national champions and, as I mentioned, Made in China 2025, which is targeting the next generation of our industries," Paul said. "It's steel today; it's robots tomorrow. We have a lot at stake here with respect to American innovation and American jobs."
Underscoring the fluid nature of U.S. trade policy, Trump on April 12 reversed course and said he was open to rejoining the Trans-Pacific Partnership. Dooley praised TPP during the hearing, and on April 13 said he welcomed Trump's decision and called TPP the "most effective way" to gain leverage in talks with China.
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